Credit issuing businesses of all sizes and types sometimes have problems with customers who are delinquent in paying off debt. Non-payment of debt, such as credit card debt, has cost businesses billions of dollars in revenue. Most credit issuers do not merely wait for delinquent customers to pay their debt. Instead, to recover all or a portion of the debt, they usually employ various tactics to collect payments from their customers.
Many credit issuers initially make an effort to collect overdue payments using some type of reminder, such as a letter or a phone call. Initial efforts are usually non-confrontational in case there has been a misunderstanding, such as the customer erroneously believing that all debt was previously paid or the credit issuer not receiving payments that actually were sent by the customer. A credit issuer often will receive payments from some customers in response to such a reminder. However, for other customers, the reminder will not be sufficient and their debts will remain unpaid.
Accounts that remain overdue for a lengthy period of time may be designated as a charged-off account. A charged-off account is an account on which a customer has not made a payment for a predetermined time period. Credit issuers consider charged-off accounts “written off” from their books (e.g., no longer receivable). Credit issuers may continue to attempt collection on charged-off accounts, but customers may no longer use the account to create further debt.
If initial collection efforts fail, some credit issuers resort to using debt collection agencies to collect payments from delinquent customers. For example, a credit issuer may give a number of charged off accounts to an agency, while retaining ownership of the accounts. When customers provide payments to the agency, the agency keeps a percentage (e.g., 50%) and forwards the remainder to the credit issuer. Credit issuers may also try selling a portfolio of charged off accounts to an agency. Under this arrangement, agencies essentially buy portfolios for a fraction of the debt amount (e.g., less than one cent per dollar) and attempt collection. Accordingly, a customer then owes the debt collecting agency instead of the original credit issuing business. However, the practice of buying portfolios of charged-off debt may not be very attractive to the purchasing agency. Some businesses believe the practice is high risk because there is a good chance that the customer will not pay.
Some businesses wish to avoid jeopardizing the relationship they have with their customers and continue to attempt collection themselves. For example, hospitals may not want to sell debt to collection agencies because they do not like forceful tactics, they are happy with the money they get from insurance, and/or want repeat business. Other motivations for businesses keeping control of debt include not wanting to lose control of that debt, not wanting to damage their reputations, and concern over the debt purchaser's compliance with the Fair Debt Collection Practices Act. Continuing collection attempts may result in a diversion of management time which would be better spent doing something more constructive.
Accordingly, there is a need for an improved method and system for collecting payments on charged-off accounts and other debt. There is also presently a need for a method and system for making the sale or purchase of debt more acceptable to businesses, so that debt can be more quickly recovered at less risk to businesses.